Front-loaded Child Benefit Bill [HL]

Baroness Sherlock Excerpts

Friday 2nd December 2022 Lords Chamber

[Baroness Berridge (Con)]

My Lords, with the leave of the House, I will speak to Amendments 1 and 3 in the name of my noble friend Lord Farmer, who is unavoidably detained today. I thank the noble Baroness, Lady Sherlock, for helpful discussions and advance notice of the specific questions that her amendments seek to address. I hope that we can make the most of our Committee on this Bill. I am also grateful for the letter from the Exchequer Secretary to the Treasury outlining various concerns around this proposal.

Amendment 1 seeks to address the legislative difficulties that the Treasury has highlighted, as it would simply leave out the words “on a sliding scale”, which introduced unworkable complexity into the Bill and would potentially require HMRC to make very regular changes to the child benefit rates available to claimants. As the Treasury said, this would be challenging to operationalise and potentially expensive for taxpayers. This amendment would also hopefully answer some of the concerns raised by the noble Baroness, Lady Sherlock, around adding complexity for parents into the child benefit system.

With Amendment 1, the Front-loaded Child Benefit Bill would be deliberately simple and merely provide the legislative lever or framework around which the Government can then build detailed policy. They would of course be aided in this respect by the many respected think tanks that have published reports providing solutions to the cost of living crisis that we know is facing many families, going beyond giving money and aiming to help improve choice and encourage responsibility.

My noble friend Lord Farmer explained at Second Reading that the rationale is to increase choice for parents in how they manage childcare in the early years. We have all benefited from the research and information about the importance of those early years and the foundations that are laid at that time. During those first two or three years, many parents would like to care for their children themselves but face a considerable and increasingly insurmountable sacrifice of income to do so. Receiving the same flat rate of child benefit throughout childhood no longer fits with the financial realities of many families.

Interestingly, since the Second Reading debate in October, other think tanks such as Civitas have proposed a family support benefit, which would roll out £16 billion of government child benefit and childcare expenditure into a front-loaded payment. In August, the Policy Exchange think tank made a similar recommendation for what it termed a “baby boost” allowance for parents of children aged two and under, which would double child benefit and be funded by reallocating the significant underspend on tax-free childcare. It is that kind of thinking that this Bill is part of in terms of renewing the financial framework for families in the early years. Those costed proposals are important, because one criticism of the Bill was the upfront additional burden on His Majesty’s Treasury from a higher rate in the early years, even if the measure was ultimately cost-neutral, as there could be a correspondingly lower rate in later childhood. This reform of child benefit would be part of a much-needed redesign of financial support.

I heard at Second Reading what other noble Lords said around the expense of teenagers. No one is pretending that that is not also an expensive time, but parents are usually much less restricted in terms of the hours that they can work when their children are at school and childcare is much easier. That is also reflected in the fact that the Government give disadvantaged two year-olds, three year-olds and four year-olds all the hours that they do, usually free. Additionally, the age at which the benefit might taper off would be an age at which certain children find that they want to add to the family household income themselves.

There are advantages to this front-loaded child benefit being part of what we see as a greater overhaul of the system of financial support. However, that aspect of any new passage would need primary legislation, which is why this Bill has been brought forward. With the removal of the sliding scale, it is hopefully a very simple framework into which any Government could fit any detailed policy proposals.

Amendment 3 would insert a new clause to enable the Secretary of State to set different rates at which parents could choose to be paid in the early years and later in childhood. Importantly, that amendment would put all the policy implementation detail into the hands of Ministers to craft, so that it can be more easily changed as circumstances change than if it was in primary legislation. This would enable the front-loaded child benefit to be part of a suite of reforms benefiting parents in the early years. The second amendment makes that important change: it would no longer be up to parents to request a particular proportion, but the Government would set within the framework, for example, what proportion could be drawn down and within what age range of the children, et cetera.

As originally drafted, the Bill would have allowed the child benefit claimant to request the front-loaded payments without details of what the new rates would be and how they could be discounted in a child’s later life. That was not my noble friend’s intention, so that change in who has control would come through Amendment 3, and the delegated powers would be with the Government to develop the front-loaded system.

Briefly, I believe there is one point that the noble Baroness has raised which is not covered by the amendments. It is her query about why the Bill includes “without prejudice” in Clause 1(1B). The only reason that bit is there is as kitchen-sink legislation, just to make sure. Obviously, the provision referred to means that child benefit can never be lowered. We wanted to make it crystal clear now that even if you ended up with a group of parents claiming flat rate for the entirety of a child’s life, and then a group doing front-loaded plus decrease, none of those rates could be lowered. We are just kitchen-sinking it to make sure it does not provide any wiggle room for a future Government to say, “We’re raising child benefit, but those discounted years and the old years do not get the same percentage increase.” That is why the provision is there; it is without prejudice to that, so it would mean there could be no change to that fundamental principle—basically, that child benefit never goes down.

I hope that has clarified those questions for the noble Baroness and I beg to move.

[Baroness Sherlock (Lab)]

My Lords, I thank the noble Baroness, Lady Berridge, for standing in for the noble Lord, Lord Farmer, and introducing the amendments in his name. I shall speak to Amendments 2, 4 and 5 in my name. Having suggested to the usual channels that we have a single group, I will cover everything in one speech, so it may be slightly longer than normal. These are all probing amendments, which I have tabled simply to allow us to explore how the proposal to front-load child benefit would work. I would like to look at three sets of issues.

First off, there is the value of child benefit paid up front. At Second Reading, the noble Lord, Lord Farmer, argued—and the noble Baroness, Lady Berridge, agreed—that the aim of the Bill is to direct more money to parents in the early years to allow them to make different choices. For that to work, it would need to be enough to make a difference but that is going to be quite hard. Child Poverty Action Group research shows that last year the additional basic cost of a child from birth to age 18 was over £76,000 for a couple family, of which child benefit covers about 22%. If you add in housing and childcare costs, the figure rises to over £160,000. The figure for single-parent families is higher still, so how much extra could they get?

Amendment 3 would leave the framing of options to the Government, as we have heard, so my first question is therefore for the Minister. Could the child benefit computer cope with the level of complexity this would introduce? It is a long time since I was a Treasury spad, but my memories of it are such that it made me wonder: when Ministers decided to withdraw child benefit from higher-rate taxpayers, was there perhaps a reason they used the tax system, rather than deciding to means-test it in the more conventional way?

I ask the noble Baroness, Lady Berridge: would the Bill as amended allow Ministers to choose any combination of sums? Could a choice be to have 95% of lifetime child benefit in year 1 and the other 5% over the rest of a child’s childhood, or vice versa? More likely, I imagine, is the Policy Exchange model, to which the noble Lord, Lord Farmer, referred at Second Reading. That proposed that half the total entitlement to child benefit should be available during the first three years of a child’s life, and the other half spread over the remaining years of entitlement.

The Bill provides, and the noble Baroness has confirmed, that the intent is that the amount payable over a child’s life would be the same, whichever path was chosen. My Amendment 2 says that it should be the same in real terms, which is there to allow me to ask the noble Baroness, Lady Berridge: is it the intention that front-loaded child benefit would be paid at nominal value—in other words, at today’s child benefit rates—or would some account be taken of the impact of inflation and change in purchasing power over the years?

Because I am sad, I did some back-of-the-envelope calculations, using the example of a family with two children who took the Policy Exchange model at the start of this financial year. I confess that I made the children twins to make the sums easier. If the money is paid out at nominal value—that is, today’s child benefit rates—I estimate that the total amount paid over 16 years would be £30,160.